Oil price leaps on talk of Iranian attack

March 29, 2007 — 10.00am

NEW YORK: US crude oil futures on Tuesday briefly shot up more than $US5, or 8.2 per cent, in late electronic trading to hit $US68 a barrel, the highest level since early September, amid unsubstantiated rumours Iran had fired on a US naval vessel in the Persian Gulf.

Prices were trading around the day's settlement at $US62.93, then jumped sharply close to 5pm here. Traders were stumped to explain as prices swung dramatically in a matter of minutes. New York Mercantile Exchange personnel confirmed that all prices flashed on trading screens were accurate.

"The market has been on pins and needles with the Iran situation and as soon as the rumour mill got started things took off," said Phil Flynn, analyst at Alaron Trading in Chicago.

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Later, the US Navy said it had no information to substantiate the market rumour that Iran had fired at a US ship.

The White House added that it had no information to indicate any incident taking place regarding Iran.

Later, as electronic trading closed for the day on Nymex, crude oil for May delivery last traded up $US1.57, or 2.5 per cent, at $US64.48 a barrel.

That was the highest intra-day price for near-month crude contract since $US68.85 on September 6, 2006.

Before the spike, May crude ended open-outcry trading up just 2c at $US62.93 a barrel, the highest settlement since $US63.72 on December 20.

In London, May Brent crude last traded up $US1.24, or 1.9 per cent, at $US65.65 a barrel, after leaping as high as $US69. Earlier, the contract settled up 19c, or 0.3 per cent, at $US64.60.

Earlier in the day, energy futures retreated on profit-taking after rallying on Monday over the international tension over Iran and its disputes over nuclear power and the holding of British naval personnel.

Iran says it could charge the 15 sailors and marines with illegally entering its waters. Britain insists the two boatloads of sailors were in Iraqi waters in the northern Gulf and has demanded their immediate release.

The sailors' capture on Friday heightened tensions between Iran and the West just a day before the UN Security Council imposed new sanctions on Iran over its disputed nuclear program. Britain's Prime Minister, Tony Blair, warned Tehran on Tuesday of a "different phase" if it did not free the sailors and marines.

"As long as the market is in bullish mode, Iran will be a factor as neither the hostage or the nuclear situations look likely to go away quickly," said an analyst in Houston.

Traders took a closer look at forecasts for Wednesday's US Government inventory data, in which analysts expect further drawdowns in gasoline and distillate supplies.

In France, workers voted on Tuesday to continue a crippling two-week strike at France's Fos-Lavera oil terminal, which has forced some refineries to cut output, a spokesman at France's petroleum industry body UFIP said.